High Court of Calcutta

Sudipta Bhattacharyya and Ors. Vs. Visva-Bharati and Ors.

MANU/WB/0522/2021

27.07.2021

Service

The University cannot deduct a portion of the salary of its employees, as donation, without obtaining their consent

The Petitioners are Adhyapakas of different departments of Visva-Bharati, Santiniketan. They are dissatisfied with the action on the part of the Registrar (Acting), Visva-Bharati in issuing a notice being No. REG/1547 dated 24th May, 2020 intimating that the accounts office will deduct a day’s salary from the monthly salary of May, 2020, for donating the same in the Chief Minister’s Relief Fund, West Bengal/West Bengal State Emergency Relief Fund in aid of the people affected by cyclone Amphan that hit Kolkata and several districts of West Bengal on 20th May, 2020.

The issue to be decided in the instant writ petition is, whether the University can deduct a portion of the salary of its employees, as donation, without obtaining their consent.

An employee is paid salary in lieu of the service rendered. The same is a valuable right in the hand of the employee. The said right cannot be curtailed or infringed without a definite provision of law. Though the University tried to overcome the lacuna in the notice dated 24th May, 2020, by publishing the subsequent notice dated 29th May, 2020 by invoking certain provisions of the Act, but even then, the act of the University cannot be said to be a valid one.

The notice dated 29th May, 2020 mentions that the employees of Visva- Bharati ‘are expected to donate’. The term ‘expected’ can never be treated as a mandate. An option to ‘not opt’ ought to have been inserted. The University deducted a day’s salary from several employees by ignoring their unwillingness. unilateral deduction of salary or any portion thereof, from an employee, without any authority of law, without taking his consent, cannot be termed as donation. The same amounts to illegal deduction.

The country is passing through an unprecedented crisis. It is desirable that citizens come forward voluntarily to help the needy. Providing help, certainly, does not mean, snatching away the legal right of an employee. To donate is a benevolent act. It comes from the free will of the donor. It is not to be obtained by force or coercion. The University can always adopt ways and means to provide relief to those in need. It is not necessary that force has to be applied to reach the goal. Applying force is sharply contrary to the Rabindrik culture and tradition which gurudev symbolizes. Petition partly allowed.

Tags : Salary Deduction Validity

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High Court of Delhi

Mohd Azim vs Delhi Development Authority and Ors.

MANU/DE/1402/2021

27.07.2021

Civil

In exercise of jurisdiction vested in present Court under Article 227 of the Constitution, Court is not to reappraise facts

Present petition has been filed by the Plaintiff before the learned Trial Court under Article 227 of the Constitution of India, 1950 praying that the impugned order of the Additional District Judge/Appellate Court be set aside and as a consequence thereof, allow the application under Order XXXIX Rule 1 and 2 CPC filed by the Petitioner/Plaintiff and grant temporary injunction against the Respondent No.1/Delhi Development Authority ('DDA') restraining it from demolishing the premises in question till the suit was decided.

In the exercise of the jurisdiction vested in this Court under Article 227 of the Constitution, the Court is not to reappraise facts. The scope is limited to an inquiry as to the existence of some perversity or grave error in the impugned order that would call for rectification. As observed by the Supreme Court in India Pipe Fitting Co. v. Fakruddin M.A. Baker, the limitation of the High Court while exercising power under Article 227 of the Constitution is well-settled. Power under Article 227 of Constitution is one of judicial superintendence and cannot be exercised to upset conclusions of facts however erroneous those may be.

In the instant case, the suit has been filed by the Petitioner/Plaintiff, for an injunction only against the Respondent No.1/DDA. The Respondent No.1/DDA has claimed ownership of the property in question and described the Petitioner/Plaintiff as an encroacher. The Respondent No.2/DWB has described the Petitioner/Plaintiff as an unauthorized occupant. The Petitioner/ Plaintiff has claimed to be owner in adverse possession as against the Respondent No.2/DWB, while also claiming that since 2010, an application had been filed by him to Respondent No.2/DWB to treat him as a tenant. No declaration has been sought against Respondent No.2/DWB. Thus, the Petitioner/Plaintiff, from the side of both the Respondents is someone without any right to remain in possession of the suit property. He has not been able to prima facie show that, he has legally entered into the property and has a right to remain in the said premises. The demarcation report included the determination of the location of the suit premises. Modern methods of TSM has been used to demarcate the land. The claim of the Petitioner/Plaintiff that the suit premises fall in Khasra No.1151/3 has been found incorrect.

Furthermore, Respondent No.1/DDA has filed the document of the Ministry of Rehabilitation to show that Khasra No. 216 was transferred to it way back in the year 1968. The demarcation report has located the suit property as described by the Petitioner/Plaintiff to be falling in Khasra No.216. This also prima facie shows that the case of the Petitioner/Plaintiff to remain in possession is not made out.

As regards the claim of Respondent No.2/DWB, the notification relied upon by Respondent No.2/DWB is of the year 1989. There is nothing, on the basis of which, it can be said that before such notification, Respondent No.1/DDA had been notified or rather Respondent No.1/DDA was given an opportunity to show the documents to the Respondent No.2/DWB. The mere notification issued by respondent No.2/DWB, 30 years after the land had been transferred by the Ministry of Rehabilitation as an Evacuee Property to the DDA, cannot suffice to protect the possession of the Petitioner/Plaintiff. There is no perversity or error in the reasoning contained in the impugned order. Petition dismissed.

Tags : Possession Injunction Entitlement

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Supreme Court

Orator Marketing Pvt. Ltd. vs. Samtex Desinz Pvt. Ltd.

MANU/SC/0487/2021

26.07.2021

Insolvency

A person who advanced interest free loans to corporate body is also a financial creditor and can initiate CIRP

Present appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 (IBC) is against the final judgment of the National Company Law Appellate Tribunal (NCLAT), whereby the NCLAT dismissed the appeal of the Appellant and confirmed the order of the Adjudicating Authority, i.e., the National Company Law Tribunal (NCLT), dismissing the petition filed by the Appellant under Section 7 of the IBC with the finding that the Appellant is not a financial creditor of the Respondent. The Appellant is an assignee of the debt in question.

The short question involved in this Appeal is, whether a person who gives a term loan to a Corporate Person, free of interest, on account of its working capital requirements is not a Financial Creditor, and therefore, incompetent to initiate the Corporate Resolution Process under Section 7 of the IBC.

In Pioneer Urban Land and Infrastructure Ltd. vs. Union of India, present Court held that, even individuals who were debenture holders and fixed deposit holders could also be financial creditors who could initiate the Corporate Resolution Process. The definition of ‘financial debt’ in Section 5(8) of the IBC cannot be read in isolation, without considering some other relevant definitions, particularly, the definition of ‘claim’ in Section 3(6), ‘corporate debtor’ in Section 3(8), ‘creditor’ in Section 3(10), ‘debt’ in section 3(11), ‘default’ in Section 3(12), ‘financial creditor’ in Section 5(7) as also the provisions, of Sections 6 and 7 of the IBC.

Under Section 6 of the IBC, a right accrues to a Financial Creditor, an Operational Creditor and the Corporate Debtor itself to initiate the Corporate Insolvency Resolution Process in respect of such Corporate Debtor, in the manner provided in Chapter II of the IBC. Section 7 of the IBC enables a Financial Creditor to file an application for initiating Corporate Insolvency Resolution Process against a Corporate Debtor either by itself, or jointly with other Financial Creditors or any other person on behalf of the Financial Creditor, as may be notified by the Central Government, when a default has occurred. The eligibility of a person, to initiate the Corporate Insolvency Resolution Process, if questioned, has to be adjudicated upon consideration of the key words and expressions in the aforesaid Section and other related provisions.

Corporate Resolution Process gets triggered, when a Corporate Debtor commits a default. A Financial Creditor may file an application for initiating a Corporate Insolvency Resolution Process against the Corporate Debtor, when a default has occurred. Both NCLAT and NCLT have failed to notice clause(f) of Section 5(8), in terms whereof ‘financial debt’ includes any amount raised under any other transaction, having the commercial effect of borrowing.

The trigger for initiation of the Corporate Insolvency Resolution Process by a Financial Creditor under Section 7 of the IBC is the occurrence of a default by the Corporate Debtor. ‘Default’ means non-payment of debt in whole or part when the debt has become due and payable and debt means a liability or obligation in respect of a claim which is due from any person and includes financial debt and operational debt. The definition of ‘debt’ is also expansive and the same includes inter alia financial debt. The definition of ‘Financial Debt’ in Section 5(8) of IBC does not expressly exclude an interest free loan. ‘Financial Debt’ would have to be construed to include interest free loans advanced to finance the business operations of a corporate body. The judgment and order impugned is, accordingly, set aside. The order of the Adjudicating Authority, dismissing the petition of the Appellant under Section 7 of the IBC is also set aside. The appeal is, therefore, allowed.

Tags : CIRP Initiation Right

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Customs, Excise and Service Tax Appellate Tribunal

ITC Freight Services Pvt. Ltd. Vs. C.C., C.E. & S.T., Cochin

MANU/CB/0060/2021

26.07.2021

Service Tax

Activity of Freight Forwarding per se is not includible in CHA Services

The present appeal is directed against the impugned order passed by the Commissioner of Service Tax, confirming the demand of service tax of Rs. 84,81,190 under the category of "Customs House Agent Services" for the period 2008-2009 to June 2012 and Rs. 10,50,656 on margin earned on trading of freight for the period from July 2012 to March 2013 along with interest and penalty under Section 76 and 77(2) and 78 of the Finance Act, 1994.

The Appellant is a private limited company and is mainly engaged in the business of freight forwarding wherein it undertakes various activities in relation to transportation of goods in the course of import/export by sea and air. Appellant is also authorized to act as Customs House Agent under Customs House Licensing Regulations, 2004 and has been granted license of Customs House Agent.

The scope of CHA service is restricted only to the licensed activities relating to either (a) entry or departure of conveyances at any Customs Station or (b) import or export of goods at any Customs Station. Further, from the definition of 'CHA' Services that, freight forwarding is an activity outside the scope of a CHA's business, and freight forwarding is undertaken to get the goods transported from/to international boundaries to/from the Indian ports and the said activity is not in any way related to CHA's business and CHA is not required to execute these services in the course of CHA's business. In the case of Bax Global India Ltd. vs. CST, Bangalore, it has been held that the scope of the activity of a Custom House Agent is limited to the entry or departure of conveyances or import or export of goods at any customs station and does not extend beyond the same.

Further, the finding of the learned Commissioner that the activity of the appellant is a composite service and the main service out of the bundle of composite services is CHA service is factually incorrect because the Appellants have not been charging a lumpsum amount rather the Appellants have been charging separate amounts indicated in the CAN/Invoice for individual activities and the activities are separately provided depending upon the requirement of the customer and therefore, the principles of classification adopted by the learned Commissioner is not applicable in the instant case.

Further, freight forwarding charges are recovered by the Appellant independent of the CHA Service provided by them to their customers. It is a settled law that where an amount is considered as part of the value of goods, the same amount cannot be subjected to service tax as held by the Tribunal in the case of United Shippers and affirmed by the Hon'ble Apex Court.

As far as extended period of limitation is concerned, the ingredients mentioned in terms of proviso to Section 73(1) of Act has not been fulfilled by the Department and moreover in the present case, the Appellant has a bona fide belief that, they are not liable to pay service tax on the differential freight amount collected. The whole issue of leviability of service tax on Freight Forwarding activity was not clear and it was only after the decision of Bax Global India Ltd. v. CST, Bangalore, the activity of Freight Forwarding per se was held to be not includible in CHA Services. Therefore, the issue involved relates to interpretation of provisions of a statute and in such a situation, extended period cannot be invoked. The impugned order is not sustainable in law and therefore, the same is set aside. Appeal allowed.

Tags : Demand Confirmation Legality

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Income Tax Appellate Tribunal

DCIT, New Delhi vs. Hero Motocorp Ltd., New Delhi

MANU/ID/0586/2021

26.07.2021

Direct Taxation

Concealment of income can be levied only in cases where the concealment has been proved

Assessee is a company who filed its return of income for A.Y. 2008-09, declaring total income of Rs.1307,37,84,038. Thereafter, assessee filed revised return of income with increased claim of TDS. Thereafter, the assessment was framed under Section 143(3) read with Section 144C of the Income Tax Act, 1961 (IT Act) and the total income was determined at Rs.4585,87,70,541 by making various additions/ disallowances amounting to Rs.3355,12,31,399. Aggrieved by the final assessment order, Assessee filed appeal before ITAT. ITAT vide order deleted additions/disallowances to the extent of Rs.3279.25 crores, additions/ disallowances to the extent of Rs.68.60 crores were set aside to the file of AO for reconsidering the matter in light of the directions in the order and confirmed the additions/ disallowances to the extent of Rs.4.86 crores.

On the additions/ disallowances confirmed by ITAT and some other additions/ disallowances which were suomoto surrendered by the assessee during the assessment proceedings, AO vide penalty order passed under Section 271(1)(c) of the Act levied the penalty of Rs.2,47,28,481. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who vide order granted substantial relief to the assessee. Aggrieved by the order of CIT(A), Revenue is in appeal.

The issue in the present grounds are with respect to levy of penalty under Section 271(1)(c) of the Act. It is an undisputed fact that, the various additions were made by the AO and on the additions which have been upheld by Tribunal, AO has levied penalty under Section 271(1)(c) of the Act.

Hon'ble Delhi High Court in the case of PCIT vs. Harsh International Pvt. Ltd. has held that, concealment of income can be levied only in cases where the concealment has been proved. It has further observed that, if the quantum order itself has been challenged before the High Court and the High Court has framed substantial question of law in appeal then it would show that, the alleged concealment is not final and the issue is disputable and the penalty levied by Assessing Officer in such cases cannot survive. The ratio of the aforesaid decision would be squarely applicable to the facts of the present case. In such a situation, relying on the aforesaid decision in the case of PCIT vs. Harsh International Pvt. Ltd., there is no reason to interfere with the order of CIT(A) and thus the ground of Revenue are dismissed. Appeal of the Revenue is dismissed.

Tags : Assessment Penalty Levy

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Income Tax Appellate Tribunal

Shree Alibag Kutchi Visa Oswal Jain Sangh vs. Commissioner Of Income-Tax

MANU/IP/0121/2021

26.07.2021

Direct Taxation

The issues of assessment cannot be considered at the time of grant of registration

Present is an appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Exemption), ['the CIT (Exemption)]') under Section 12AA(1)(b)(ii) of the Income Tax Act, 1961 (IT Act) denying the grant of registration under Section 12AA of the Act.

The Appellant is a trust formed in the year 1988 with the objects of religious-cum-charitable and was duly registered with the Bombay Public Trust Act, 1950. The Appellant trust filed an application in Form No.10A for grant of registration under Section 12AA of the Act. On receipt of the said application, the CIT (Exemption) called upon the Appellant to file certain information/clarification/details through ITBA Portal so as to satisfy himself about the genuineness of the activities of the trust. The Appellant had complied with the said questionnaire by filing the necessary information/details etc.

On consideration of the information/details filed before the CIT (Exemption), the CIT (Exemption) was of the opinion that, the voluntarily corpus donations received during the financial years 2017-18 and 2018-19 was not offered to tax and paid the taxes thereon. On this ground, he had denied the grant of registration under Section 12AA of the Act.

The learned CIT (Exemption) had denied the grant of registration under Section 12AA of the Act solely on the ground that, the voluntarily contributions/donations received and credited to the corpus accounts during the financial years 2017-18 and 2018-19 were not offered to tax and paid the taxes thereon. Undoubtedly, this issue falls under the realm of "assessment". Now, it is trite law that the grant of registration and exemption are two separate and independent proceedings. The question of exemption cannot be considered at the time of grant of registration.

The learned CIT (Exemption) can only look into two aspects i.e. whether or not (i) the objects of the trust are charitable in nature and (ii) the genuineness of the activities of the trust in the light of law laid down by the Hon'ble Apex Court in the case of Ananda Social and Educational Trust vs. CIT. It is also equally settled position of law that, the grant of registration and assessment are two separate and distinct procedures prescribed under the Income Tax Act. The issues of assessment cannot be considered at the time of grant of registration.

From the perusal of the impugned order, it is clear that the learned CIT (Exemption) had denied the grant of registration by taking into consideration that the corpus donations collected during the financial years 2017-18 and 2018-19 had escaped assessment to tax which clearly falls under the realm of the "assessment". In view of the settled position of law, present Tribunal is of opinion that, the grounds on which the ld. CIT (Exemption) had rejected the grant of registration are untenable in law. Accordingly, the learned CIT (Exemption) is directed to grant the registration under Section 12AA of the Act. The appeal filed by the assessee stands allowed.

Tags : Registration Denial Legality

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Supreme Court

Prakash Gupta Vs. Securities and Exchange Board of India

MANU/SC/0469/2021

23.07.2021

Capital Market

SEBI's consent cannot be mandatory before SAT or the Court before which the proceeding is pending, for compounding of offence under Section 24A of SEBI Act

The Appellant is being prosecuted for an offence under Section 24(1) of the Securities and Exchange Board of India Act, 1992 ("SEBI Act"). The Appellant sought the compounding of the offence under Section 24A. Trial Judge rejected the application upholding the objection of the Securities and Exchange Board of India that, the offence could not be compounded without its consent. By a judgment of a Single Judge of the High Court, the order of the Trial Judge has been affirmed in revision. The High Court has held that, the trial has reached the stage of final arguments and the application for compounding cannot be allowed without Securities and Exchange Board of India's ("SEBI") consent.

Section 24B of Act has provided for the exercise of powers by the Central Government to grant immunity from prosecution on the recommendation of SEBI. In contrast, Section 24A of Act is conspicuously silent in regard to the consent of SEBI before the SAT or, as the case may be, the Court before which the proceeding is pending can exercise the power. Hence, it is clear that SEBI's consent cannot be mandatory before SAT or the Court before which the proceeding is pending, for exercising the power of compounding under Section 24A of Act.

In exercising the power of compounding under Section 24A of Act, the SAT or the Court must be conscious of the gravity of the offences that the Accused are being prosecuted for, considering that the legislative scheme does not individually prescribe separate sentencing provisions which would otherwise have provided an insight into the gravity and gradation of the offences. Hence, SEBI's view on the compounding would become all the more important, in this light.

The allegations in the present case involved serious acts which impinged upon the protection of investors and the stability of the securities' market. The observation in the order of adjudication of the Chairperson of the SEBI dated 22 September 2000, that no loss has been caused to the investors as a result of the proposal which was submitted by the promoters to purchase the shares at the rate of Rs. 12 per share, would not efface the element of alleged wrong doing. Such alleged acts of price rigging and manipulation of the prices of the shares have a vital bearing on investors' wealth and the orderly functioning of the securities market. SEBI was, therefore, justified in opposing the request for the compounding of the offences.

The matter was referred to the HPAC constituted by SEBI and presided over by a former judge of the Bombay High Court, which denied the request for compounding. This decision which has been taken by SEBI is not mala fide nor does it suffer from manifest arbitrariness. On the contrary, having due regard to the nature of the allegations, present Court is of the view that an order for compounding was not warranted. The judgment of the High Court is affirmed. The appeal disposed of.

Tags : Offence Compounding Denial

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